Thursday, November 05, 2009

Canadian Copyright Collectives and the Copyright Board After 20 Years: Does the System Serve its Purpose?

The following is my article in somewhat more convenient form on the above subject from the Hill Times Policy Briefing on Copyright published on November 2, 2009 and available from the Hill Times website here.


OTTAWA - This is the 20th anniversary year both of the Hill Times and also its neighbour across the Sparks Street Mall, Canada's Copyright Board. "The Board" is a specialized quasi-judicial tribunal located at the iconic address of 56 Sparks Street in Ottawa, one floor up from the fabled USC Canada, which was founded by Dr. Lotta Hitschmanova in 1945 as the Unitarian Service Committee of Canada.

The USC and the Copyright Board are both, ironically, involved in the redistribution of Canadians' money. However, unlike the volunteer contributions to the USC, Copyright Board tariffs have the force of law and are often referred to as "taxes". Many of these tariffs are deeply hidden but lucrative such as those on broadcasters or businesses that utilize "background music". Others are far more visible, such as the recent surprisingly costly tariff of $5.16 on every full time student in Canada's K-12 educational system outside of Quebec, which also entails a whopping additional retroactive liability of about $40 million, $16 million of which arises in Ontario. Questions will be asked about how such an expensive tariff arose and why so much money is being paid for windfall photocopying royalties and not on more productive and innovative purposes such teachers, books and computers. As is often the case, there is no such tariff in the USA.

Canadian government policy has deliberately encouraged and even subsidized this collective system on the assumption that these tariffs will actually help actual creators. If so, these tariffs would take the heat off the beleaguered subsidy system for Canadian culture. But copyright tariffs work best for those who are already commercially successful and the collectives' lawyers, consultants and managers. Much if not most tariff money leaves the country as a result of international treaty obligations. Subsidies, however, can be narrowly targeted and kept in Canada.

Canada has about 36 active collectives with annual revenues approaching $500,000,000. Contrast this with only about a half dozen counterpart collectives in the USA. Canada's Copyright Board, which has a staff of 13 plus up to five full time members, is by far the largest such organization anywhere.

There are many good things about the Canadian collective system, which has grown exponentially in the last 20 years from the previous part-time regime that existed for about five decades. This growth has, however, created some issues that need to be addressed. Here are some examples.

The costs of Copyright Board hearings have become absurdly and unnecessarily high. This actually benefits collectives, because it drives many potential objectors away. Besides, these sole purpose collectives recover their costs from the tariff payments, which means from ordinary Canadian businesses, consumers and taxpayers who invariably have many other things to worry about besides copyright. There should be serious consideration of a cost recovery mechanism, as is found at the CRTC.

Although there are usually only a handful or so of actual hearings each year at the Board, these usually take several years to reach fruition and the delay in issuing the decision can be 18 months or more. This pace contributes to the enormous expense of the hearings and to the very real problem of significant, lengthy and costly retroactivity, such as recently seen in the educational and background music sectors. The Board's jurisdiction to award such retroactive tariffs may be vulnerable to challenge. The "mother" of all Board hearings, SOCAN's internet Tariff 22 for music on the internet, is still unresolved after 15 years with the end nowhere near in sight.

The lack of transparency of the collective system needs to be addressed through mandatory public filings of data disclosing such information as costs of administration, aggregate salaries, legal and consulting fees, etc. and how much is left over for actual creators. Canadians and collective members themselves also need to know the mean and average distribution per member within each collective, since that is a key indicator of the efficacy of the system. For example, the Canadian Private Copyright Collective has spent over $25 million on lawyers, consultants, experts, administration, public relations, travel etc. over the last ten years. But the average distribution to actual beneficiaries of the blank media levy is only about $160 annually and probably far less in most cases involving the actual musicians who do appear on the collective's radar. And many musicians don't. The Government needs to be able to evaluate the collective system though verifiable data and not just anecdotal "feel good" info provided by lobbyists.

The Board needs to revisit basic legal principles of evidence. It puts far too much reliance on opinion evidence presented by supposed experts, although it usually does not formally "qualify" these experts as such. Some of these witnesses who appear regularly before the Board have close economic ties if not outright dependency on the party calling them, and may be effectively playing a management and/or advocacy role for the collective. The Board has shown great reluctance to permit any questions relating to the independence of these "experts" or going to the weight of their testimony.

The Board should not be expected to take upon itself the job of filling what its Chairman William Vancise calls "gaps" in the legislation. Arguably, the Government has left far more to the Board than was prudent on issues such as retransmission and the blank media levy in order to avoid making tough decisions that have been taken in other countries for better or worse. The result was a far more expensive retransmission regime than was envisaged with costs passed onto Canadian cable subscribers. The basically blank regime for the blank media levy has led to an extraordinary situation in which the Federal Court of Appeal ("FCA"), which reviews the Board, has twice had to tell the Board that the legislation does not allow for a levy on digital audio recorders. This has prompted some very unusual and unusually explicit public criticism of the Court by Chairman Vancise, who described the Court's most recent ruling by Justice Karen Sharlow as "six turgid paragraphs." He describes the previous ruling by Justice Marc Noël as "obiter" and a "throw away line that has had extreme consequences, not the least of which is at least 10's of millions of dollars in royalties that have not been paid to authors, composers and performers and threatens to destroy the private copy regime." (Full disclosure - I argued successfully against the Board's view in both of these instances at the FCA).

Collective administration is essential for copyright, but it does not follow that more and more inefficient collectives and more protracted and expensive hearings are better for public policy. It was a prescient Judge James Parker who effectively created the predecessor to the current Copyright Board with his landmark 1935 report. It is time once again for a judicially led commission to solve some of the difficult problems now facing Canadian collectives and the Copyright Board that others, including the Board itself, seem unable or unwilling to confront. Otherwise, Canada's current collective system will largely benefit only a handful of lawyers, consultants and managers of collectives and fail in its purpose of rewarding actual creators and protecting the public interest.

Howard P. Knopf


Macera & Jarzyna, LLP

Ottawa, Canada

Note: The above is based upon the author's paper for the Law Society of Upper Canada in 2008. It reflects solely his own views, and not necessarily those of any of his clients.


1 comment:

  1. You are spot on about the dubious benefits of many of these new rights. A good example is the UK artist resale royalty; The 20 top artists have recieved %50 of all of the money paid out!

    You state that collective management is essential to copyright. However it is also the cause of most of the excess copyright in the world:
    It creates large managements that are in a strong conflict of interest: excess extensions of copyright are good for management: increased costs for everybody else, are increased income for management.
    Moral Hazard is very widespread these days, the management gets the fees and everybody else gets the risk.
    I feel that the problem of how to deal with a post-owner "managerial" culture is one of the most pressing issues of the day. It has brought the US to its knees